2012 Natural Catastrophe Year in Review: January 3, 2013

2012 NATURAL CATASTROPHE YEAR IN REVIEW
January 3, 2013
Agenda
Welcome/Introduction Terese Rosenthal

US Natural Catastrophe Update Carl Hedde Global Natural Catastrophe Update Ernst Rauch Economic Implications of Natural Catastrophe Losses Dr. Robert Hartwig
Questions and Answers
Webinar Interactivity
Questions and Answers You will have an opportunity to ask questions at the conclusion of the presentation.
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Live Tweeting
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#NATCAT2012
US NATURAL CATASTROPHE UPDATE

Carl Hedde, SVP, Head of Risk Accumulation Munich Reinsurance America, Inc.
MR NatCatSERVICE
One of the worlds largest databases on natural catastrophes The Database Today From 1980 until today all loss events; for USA and selected countries in Europe all loss events since 1970. Retrospectively, all great disasters since 1950. In addition, all major historical events starting from 79 AD eruption of Mt. Vesuvius (3,000 historical data sets). Currently more than 31,000 data sets
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US Natural Catastrophe Update
2012 Headlines
Insured losses in the United States in 2012 totaled $57.9 billion far above the 2000 to 2011 average loss of $27 billion (in 2012 Dollars). Hurricane Sandy makes landfall in New Jersey, becoming the worst storm to hit northeastern United States since the Great New England Hurricane of 1938, causing insured losses in excess of $25 billion. Despite a relatively quiet year for tornadoes, insured losses from thunderstorm events exceeded $14 billion, the second highest annual total on record.
Severe drought cripples agriculture over large section of central United States.
Dry conditions lead to the most damaging wildfires in Colorado history.
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Natural Disaster Losses in the United States

2012
As of January 1, 2013
Number of Events 4
Fatalities 143
Estimated Overall Losses (US $m) 52,240
Estimated Insured Losses (US $m) 26,360
Tropical Cyclone Severe Thunderstorm Drought Wildfire Winter Storm
115
118
27,688
14,914
2 38 2
0 13 7
20,000 1,112 81
16,000 595 38
Flood
19
3
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0
7
Source: MR NatCatSERVICE - Includes Federal Crop Insurance Losses.
Natural Catastrophes in the USA 1980 2012

Number of events
Number
300
2012 Total: 184 events
250
200
41
150
19
100
121
50
3
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Geophysical events (Earthquake, tsunami, volcanic eruption) Meteorological events (Storm) Hydrological events (Flood, mass movement) Climatological events (Extreme temperature, drought, forest fire) 8
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Natural catastrophes in the USA 1980 2012

Overall and insured losses
Insured losses in the U.S. In 2012 were the second highest on record.
(bn US$)
200 180 160 140
120
100 80 60 40 20
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Overall losses (in 2012 values)
Insured losses (in 2012 values)
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Significant Natural Catastrophes, June Sept 2012

$1 billion economic loss and/or 50 fatalities
Date June Sept 2012 March 2 - 3 April 2 4
Event Central US Drought Thunderstorms Thunderstorms
Estimated Economic Losses (US $m) 20,000 5,000 1,550
Estimated Insured Losses (US $m) 16,000 2,500 775
April 13- 15
April 28 29 May 25 30 June 6 7 June 11 13 June 28 July 2 August 26 - 30 October 28 - 30
Thunderstorms
Thunderstorms Thunderstorms Thunderstorms Thunderstorms Thunderstorms Hurricane Isaac Hurricane Sandy
1,800
4,500 3,400 1,400 1,900 4,000 2,000 50,000
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910
2,500 1,700 1,000 950 2,000 1,220 25,000
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Source: MR NatCatSERVICE - Includes Federal Crop Insurance Losses.
Significant Natural Catastrophes, 1950 2012

Number of Events ($1 billion economic loss and/or 50 fatalities)
Eleven significant natural catastrophes occurred in the United States in 2011.
Sources: MR NatCatSERVICE
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US TROPICAL CYCLONES 2012
Photo: NASA
Tropical Cyclones Impacting the United States in 2012
Beryl Debby Sandy
Isaac
Source: NOAA
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US Hurricanes in 2012
Hurricane Isaac Landfalls on August 28 over the Mississippi River delta and Port Fourchon, Louisiana Minor to moderate wind damage in Louisiana and Mississippi, indirect wind damage due to tree fall further north. Storm surges up to 11 feet in some locations, but New Orleans levees held but some breached south of city; heavy rainfall caused significant inland flooding. Economic Losses in US of $2 billion, insured losses of $1.2 billion
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Photo: FEMA
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US Hurricanes in 2012
Hurricane Sandy Landfalls on October 29 near Atlantic City, NJ Minor to moderate wind damage along coasts of NY and NJ, widespread indirect wind damage and power outages due to tree fall across 15 states. Record storm surge of 13.88 feet in Battery Park, NY and 15+ feet along New Jersey coast.
Economic Losses in U.S. of $50 billion, insured losses of $25 billion

Photo: FEMA
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Impacts of Hurricane Sandy
Hurricane Sandy
Add few more bullet points
Photo: FEMA
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Other US Tropical Cyclones in 2012
Tropical Storm Beryl Landfall on May 28 near Jacksonville, Florida as a tropical storm with sustained winds of 70 mph; strongest May tropical storm ever to make US landfall. Minor wind damage and flooding in Florida and Georgia. Tropical Storm Debby
Landfall on June 26 near Steinhatchee, Florida as a tropical storm with sustained winds of 40 mph.
Torrential rains of up to 25 caused extensive flooding in the Florida Panhandle, with lesser flooding elsewhere in the state.
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Number of US Landfalling Tropical Cyclones 1900 - 2012

There has not been a major hurricane landfall in the US since Wilma in 2005.
Source: NOAA
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Insured US Tropical Cyclone Losses, 1980 - 2012
The current 5-year average (2007-2012) insured tropical cyclone loss is $8.9 billion per year.
Sources: Property Claims Service, MR NatCatSERVICE, NFIP
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2012 US THUNDERSTORM SEASON
Source: FEMA
2012 US Tornado Count
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Notable Thunderstorm Events

Second Half 2012
June 28 July 2: Long-lived derecho (straight-line windstorm) causes extensive wind damage from Indiana to Maryland. Millions were without power for days. US$ 2 billion insured loss. December 25 - 26: Tornado outbreak in deep south along a strong cold front. Over 51 tornadoes reported. Insured losses to be determined.
Source: FEMA
Source: Property Claims Service MR NatCatSERVICE
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US Thunderstorm Loss Trends

Annual Totals 1980 2012
Average thunderstorm losses have increased sevenfold since 1980.
First Half 2011 2011 Total: $16.4 $16.4 bn bn
Source: Property Claims Service MR NatCatSERVICE
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OTHER US NATURAL CATASTROPHES IN 2012
Source: FEMA
Current US Drought Conditions
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2012 US Drought Impacts
Worst drought in at least 25 years, dry to severe drought conditions affected over 1,600 counties across 36 states at its peak over 60% of the United States. Severe damage to crops (soybeans, corn) and livestock Low water levels along Mississippi River disrupted shipping. Economic Losses are estimated at $20 billion.
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Number of Acres Burned in Wildfires, 1980 2012
Source: National Interagency Fire Center
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Notable Wildfires in 2012
Colorado: High Park fire near Fort Collins destroyed 257 homes and Waldo Canyon fire near Colorado Springs destroyed over 300 homes, becoming the most damaging fire in state history. Insured losses from both fires are estimated at $450 million. New Mexico: WhitewaterBaldy fire scorched over 278,000 acres over May and June, becoming the largest wildfire in state history, but with minimal insurance impacts.
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Source: FEMA
Source: USFS 28
2012 US Summary
Insured losses in the United States in 2012 totaled $57.9 billion far above the 2000 to 2011 average loss of $27 billion (in 2012 Dollars). Hurricane Sandy makes landfall in New Jersey, becoming the worst storm to hit northeastern United States since the Great New England Hurricane of 1938, causing insured losses in excess of $25 billion. Despite a relatively quiet year for tornadoes, insured losses from thunderstorm events exceeded $14 billion, the second highest annual total on record.
Severe drought cripples agriculture over large section of central United States.
Dry conditions lead to the most damaging wildfires in Colorado history.
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NATURAL CATASTROPHES WORLDWIDE

Ernst Rauch Head of Corporate Climate Centre Munich Re
Global Natural Catastrophe Update
Natural catastrophes worldwide 2012

Significant events
With estimated 25bn US$ insured losses is Sandy the second costliest storm after Hurricane Katrina (62bn US$ in todays values). Losses in agriculture, infrastructure and navigation.
Hurricane Sandy, USA, Caribbean
Record storm surge, New York City severely affected
Drought, USA
2012 was - until November 2012 the warmest year in the US
Earthquakes, Italy
Series of earthquakes in Northern Italy. Strongest earthquakes: 20 May: magnitude 5.9 29 May magnitudes 5.8
The Emilia Romagna earthquakes are with 1.6bn US$ the costliest losses for the Italian insurance industry. From March until April insured losses due to thunderstorms and tornadoes amounted to 7bn US$.
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Series of tornadoes, USA
Early start of the tornado season.
Source: Geo Risks Research, NatCatSERVICE As at January 2013
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Facts
Number of events: 900 The number is well above the 10-year-average (2002-2011: 800). Fatalities: 9,500 The number is very low in comparison with previous years (2002-2011:106,000).
The deadliest event was Typhoon Bopha in the Philippines, with more than 1,000 deaths Overall direct losses: US$ 160bn
2011 is slightly below the 10-year average (2002-2011: US$ 165bn) Insured losses: US$ 65bn The insured losses are above the 10-year-average (US$ 50bn) 2012 is the third costliest year for the insurance industry worldwide (after 2011 and 2005) and the second costliest year in US (after 2005)
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Natural catastrophes worldwide 1980 2012

Number of events
Number
1 200
1 000
800
600
400
200
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Geophysical events (Earthquake, tsunami, volcanic eruption)
Meteorological events (Storm)
Hydrological events (Flood, mass movement)
Climatological events (Extreme temperature, drought, forest fire) 33
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Natural catastrophes worldwide 1980 2012

Overall and insured losses
(bn US$)
450 400
350
300
250
200
150
100 50
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Overall losses (in 2012 values)
Insured losses (in 2012 values)
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Percentage distribution
905 Loss events

12% 7%
9,600 Fatalities
7%
27% 36% 45% 48%
18%
Overall losses* US$ 160bn

10% 13%
14%
Insured losses* US$ 65bn

3%
1%
11%
63%
*in 2012 values
83%
*in 2012 values
Geophysical events (Earthquake, tsunami, volcanic eruption)
Meteorological events (Storm)
Hydrological events (Flood, mass movement)
Climatological events (Extreme temperature, drought, forest fire) 35
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The five costliest natural catastrophes for the insurance industry
Date 24-31.10.2012
Region USA, Caribbean USA
Event Hurricane Sandy
Fatalities 220
Insured losses US$ m 25,000 15,000-17,000
June-Sept.
Drought Severe storms, tornadoes Severe storms, tornadoes Severe storms, tornadoes
agriculture losses / average year approx. 9bn
2-4.3.2012 28-29.4.2012
USA USA
41 350
2,500 2,500
28.6-2.7.2012
USA
18
2,000
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Insured losses US$ 65bn - Percentage distribution per continent
5% 91% <3%
<1%
<1%
Continent America (North and South America) Europe Africa Asia Australia/Oceania
Insured losses US$ m 60,000 3,200 200 1,700 300

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Insured losses US$ 65bn - Percentage distribution per continent
91% 2012: 91 % 1980-2011: 65 %
5% <3%
65%
<1%
<1%
Insured losses US$ m 60,000 3,200 200 1,700 300

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Overall losses US$ 160bn - Percentage distribution per continent
13%
69%
16%
<1% <1% <1%
Overall losses US$ m 110,000 21,000 1,000 26,000 1,000

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Natural Catastrophes 2012

World map
Winter Storm Andrea Europe, 56 January Floods United Kingdom, 2127 November Severe storms USA, 28 June 2 July Cold Wave Eastern Europe, Jan Feb Cold Wave Afghanistan, Jan Mar Floods Flash Floods China, 2124 July Russia, 68 July
Severe Weather USA, 2829 April Hailstorms, severe weather Canada, 1214 August Drought USA, Summer Severe Storms, tornadoes USA, 24 March
Hurricane Sandy USA, Caribbean 2431 October Hurricane Isaac USA, Caribbean 2431 August
Earthquake Italy, 29 May/3 June
Typhoon Haikui China, 89 August Earthquake Iran, 11 August Floods Pakistan, 3 27 September Typhoon Bopha Philippines, 45 December
Earthquake Mexico, 20 March Floods Columbia, Mar Jun
Floods Nigeria, Jul Oct
Floods, flash floods Australia, Jan Feb
Number of events: 905
Floods, hailstorms South Africa, 20 21 October
Floods. flash floods Australia, Feb Mar
Natural catastrophes Selection of significant Natural catastrophes
Geophysical events (earthquake, tsunami, volcanic activity) Meteorological events (storm)

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Hydrological events (flood, mass movement) Climatological events (extreme temperature, drought, wildfire)
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Earthakes Italy
May 2012
Costliest insured loss 2012 outside US
Region Northern Italy, Emilia Romagna

Overall losses US$ 16bn

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Insured losses US$ 1.6bn
Fatalities 18
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Typhoon Bopha, Philippines

4 5 December 2012
Deadliest event of 2012
Source: Reuters
Region South Philippines
Overall losses US$ 600m

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Insured losses minor
Fatalities 1,100
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Summary
90% of total insured losses worldwide (US$ 65bn) were attributable to the U.S. (long-term average is = 57%) Hurricane Sandy and the U.S. drought were the costliest events
The earthquakes in Italy in May were the costliest insured losses in Italy until today 2011 was a year with no catastrophic events in terms of loss of lives, however, it was the third costliest year for the insurance industry (after 2005 and 2011) and the second costliest for the U.S. (after 2005)
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Market & Financial Impact of Catastrophe Loss:

Full Year 2012
Insurance Information Institute January 3, 2013
Robert P. Hartwig, Ph.D., CPCU, President & Economist Insurance Information Institute 110 William Street New York, NY 10038 Tel: 212.346.5520 Cell: 917.453.1885 bobh@iii.org www.iii.org
P/C Insurance Industry Financial Overview

Industry Was Very Strong When Sandy Struck; Financial Strength Remains Intact for 2013
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P/C Net Income After Taxes 19912012:Q3 ($ Millions)

$62,496
$80,000 $70,000 $60,000 $50,000 $40,000
2005 ROE*= 9.6% 2006 ROE = 12.7% 2007 ROE = 10.9% 2008 ROE = 0.1% 2009 ROE = 5.0% 2010 ROE = 6.6% 2011 ROAS1 = 3.5% 2012:Q3 ROAS1 = 6.3%
$36,819
$38,501
$44,155
$65,777
P-C Industry 2012:Q3 profits were up 222% from 2011:Q3, due primarily to lower catastrophe losses
$30,773
$30,029
$28,672
$35,204
$24,404
$20,598
$21,865
$19,316
$20,559
$14,178
$30,000 $20,000 $10,000 $0 -$10,000
$5,840
$10,870
$3,046
-$6,970
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12:Q3
* ROE figures are GAAP; 1Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields a 6.6% ROAS through 2012:Q3, 4.6% ROAS for 2011, 7.6% for 2010 and 7.4% for 2009. Sources: A.M. Best, ISO, Insurance Information Institute
$3,043
$19,150
$26,981
A 100 Combined Ratio Isnt What It Once Was: Investment Impact on ROEs
Combined Ratio / ROE
110 14.3% 105 100.6 100 95 90
Year Ago
15.9%
A combined ratio of about 100 generates an ROE of ~6.6% in 2012, ~7.5% ROE in 2009/10, 10% in 2005 and 16% in 1979
106.4 12.7% 10.9% 101.0 95.7 99.3 7.4% 4.4% 4.6%
2011:Q3 = 108.1, 3.1% ROE
18% 15%
100.1
100.8 9.6%
100.9 7.6%
100.0
12% 9%
97.5 8.8%
92.7
6.6% 6% 3% 0%
85 80
1978 1979 2003 2005 2006 2007 2008
2009
2010
2011
2012:Q3
Combined Ratio
ROE*
Combined Ratios Must Be Lower in Todays Depressed Investment Environment to Generate Risk Appropriate ROEs
* 2008 -2012 figures are return on average surplus and exclude mortgage and financial guaranty insurers. 2012:Q3 combined ratio including M&FG insurers is 100.9, ROAS = 6.3%; 2011 combined ratio including M&FG insurers is 108.2, ROAS = 3.5%. Source: Insurance Information Institute from A.M. Best and ISO data.
Profitability Peaks & Troughs in the P/C Insurance Industry, 1975 2012:Q3*
ROE
25%
1977:19.0%
20% 15%
History suggests next ROE peak will be in 2016-2017

1987:17.3% 1997:11.6% 2006:12.7%
9 Years
2012:Q3: 6.6%
10% 5% 0%
2011: 4.6%* 1975: 2.4% 1984: 1.8% 1992: 4.5%
2001: -1.2%
-5%
*Profitability = P/C insurer ROEs. 2011 figure is an estimate based on ROAS data. Note: Data for 2008-2012 exclude mortgage and financial guaranty insurers. 2012:Q3 ROAS = 6.2% including M&FG. Source: Insurance Information Institute; NAIC, ISO, A.M. Best.
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11* 12:
SURPLUS/CAPITAL/CAPACITY
Industry Claims Paying Capital Was at a Record High When Hurricane Sandy Struck; Capacity Remains Close to Historic Highs for 2013; No Fiscal Cliff in the P/C (Re)Insurance Industry
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Policyholder Surplus, 2006:Q42012:Q3

($ Billions)
$580 $560 $540 $520 $500 $480 $460 $440 $420
06:Q4 07:Q1 07:Q2 07:Q3 07:Q4 08:Q1 08:Q2 08:Q3 08:Q4 09:Q1 09:Q2 09:Q3 09:Q4 10:Q1 10:Q2 10:Q3 10:Q4 11:Q1 11:Q2 11:Q3 11:Q4 12:Q1 12:Q2 12:Q3
2007:Q3 Pre-Crisis Peak
Drop due to near-record 2011 CAT losses

$583.5 $566.5 $559.2 $544.8 $540.7 $530.5 $559.1 $550.3 $538.6 $570.7 $567.8
$521.8 $517.9 $515.6 $512.8 $505.0 $496.6 $487.1 $478.5
$511.5 $490.8
The Industry now has $1 of surplus for every $0.80 of NPW, close to the strongest claims-paying status in its history.
$463.0 $455.6 $437.1
Surplus as of 9/30/12 was up $12.8B or 2.2% from the previous record high of $570.7B set as of 3/31/12.
*Includes $22.5B of paid-in capital from a holding company parent for one insurers investment in a noninsurance business in early 2010.
Sources: ISO, A.M .Best.
The P/C Insurance Industry Both Entered and Emerged from the 2012 Hurricane Season Very Strong Financially. There is No Insurance Industry Fiscal Cliff
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PREMIUM GROWTH
Catastrophe Losses Impact Trajectory of Premium Growth
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Net Premium Growth: Annual Change, 19712012:Q3

(Percent)
1975-78 1984-87 2000-03 Net Written Premiums Fell 0.7% in 2007 (First Decline Since 1943) by 2.0% in 2008, and 4.2% in 2009, the First 3Year Decline Since 1930-33. 2012:Q3 growth was +4.2%
25%
20%
15%
10%
5%
0%
-5%
Shaded areas denote hard market periods Sources: A.M. Best (historical and forecast), ISO, Insurance Information Institute.
71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
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-10% 10% 15% 20% -5% 0%

10.2% 15.1% 16.8% 16.7% 12.5% 10.1% 9.7% 7.8% 7.2% 5.6% 2.9% 5.5%
5%
P/C Net Premiums Written: % Change, Quarter vs. Year-Prior Quarter
Sources: ISO, Insurance Information Institute.
10.3% 10.2% 13.4% 6.6% 2.1% 0.0% 0.5%
Sustained Growth in Written Premiums (vs. the same quarter, prior year) Will Continue into 2013
Premium growth in Q3 2012 was up 5.1% over Q3 2011, the strongest growth since Q4 2006
1.3% 2.3% 1.7% 3.5% 1.6% 4.1% 3.8% 3.1% 4.2% 5.1%
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2002:Q1 2002:Q2 2002:Q3 2002:Q4 2003:Q1 2003:Q2 2003:Q3 2003:Q4 2004:Q1 2004:Q2 2004:Q3 2004:Q4 2005:Q1 -4.6% 2005:Q2 -4.1% 2005:Q3 -5.8% -1.6% 2005:Q4 2006:Q1 2006:Q2 2006:Q3 2006:Q4 -1.6% 2007:Q1 2007:Q2 2007:Q3 -1.9% 2007:Q4 2008:Q1 -1.8% 2008:Q2 2008:Q3 -0.7% 2008:Q4 -4.4% -3.7% 2009:Q1 2009:Q2 -5.3% 2009:Q3 -5.2% 2009:Q4 -1.4% -1.3% 2010:Q1 2010:Q2 2010:Q3 2010:Q4 2011:Q1 2011:Q2 2011:Q3 2011:Q4 2012:Q1 2012:Q2 2012:Q3
Growth in Net Written Premium by Segment, 2012:9 Mos. vs. 2011:9 Mos.*
(Percent)
2011: 9 Mos. 2012: 9 Mos.
7% 6% 5% 4.2% 4% 3.2% 3% 2% 1% 0% All Lines
6.1%
4.0% 3.2% 3.3% 2.4%
3.8%
Personal Lines Predominating
Commercial Lines Predominating
Diversified Insurers
*Excludes mortgage and financial guaranty insurers. Source: ISO/PCI; Insurance Information Institute
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UNDERWRITING
Underwriting Losses in 2012 (and 2011) Were Elevated by High Catastrophe Losses
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P/C Insurance Industry Combined Ratio, 20012012:Q3*

As Recently as 2001, Insurers Paid Out Nearly $1.16 for Every $1 in Earned Premiums Heavy Use of Reinsurance Lowered Net Losses Relatively Low CAT Losses, Reserve Releases Relatively Low CAT Losses, Reserve Releases Higher CAT Losses, Shrinking Reserve Releases, Toll of Soft Market
120 115.8
Best Combined Ratio Since 1949 (87.6)
110
107.5
Cyclical Deterioration
Avg. CAT Losses, More Reserve Releases
106.4 100.1 100.8 98.4 95.7 92.6 101.0 99.3 100.8
Lower CAT Losses Before Sandy
100.0
100
90
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011* 2012:Q3
* Excludes Mortgage & Financial Guaranty insurers 2008--2012. Including M&FG, 2008=105.1, 2009=100.7, 2010=102.4, 2011=108.2; 2012:Q3=100.0. Sources: A.M. Best, ISO.
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Underwriting Gain (Loss) 19752012:Q3*

($ Billions)
$35 $25 $15 $5 -$5 -$15 -$25 -$35 -$45 -$55
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Cumulative underwriting deficit from 1975 through 2011 is $479B
Underwriting losses through 2012:Q3 totaled $6.7B
High cat losses in 2011 led to the highest underwriting loss since 2002
Large Underwriting Losses Are NOT Sustainable in Current Investment Environment

* Includes mortgage and financial guaranty insurers in all years. Sources: A.M. Best, ISO; Insurance Information Institute.
Combined Ratios by Predominant Business Segment, 2012:9 Mos. vs. 2011:9 Mos.*
The combined ratios for both personal and commercial lines improved substantially through 2012:Q3, prior to Hurricane Sandy
108.0 105.4 102.7 100.0 99.4
(Percent)
114 112 110 108 106 104 102 100 98 96 All Lines 109.4
2011:9M 2012:9M
112.0
98.6
Personal Lines Predominating
Commercial Lines Predominating
Diversified Insurers
*Excludes mortgage and financial guaranty insurers. Source: ISO/PCI; Insurance Information Institute
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INVESTMENTS: THE NEW REALITY
Depressed Yields Will Necessarily Influence Underwriting & Pricing

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Property/Casualty Insurance Industry Investment Income: 20002012E1

($ Billions)
$60
$54.6 $52.3 $51.2 $47.1 $47.6 $49.0 $46.8 $49.5
$50
$40
$38.9 $37.1 $36.7
$38.7
$39.6
Investment earnings in 2012 were running 14% below their 2007 pre-crisis peak
05 06 07 08 09 10 11 12E
$30 00 01 02 03 04
Investment Income Fell in 2012 Due to Persistently Low Interest Rates, Putting Additional Pressure on (Re) Insurance Pricing
1
Investment gains consist primarily of interest and stock dividends. *2012F is based on annualized 9M:2012 actual figure of $35.131B. Sources: ISO; Insurance Information Institute.
Hurricane Sandy Summary

Sandy Will Become One of the Most Expensive Events in Insurance History
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Hurricane Sandy Insured Loss Estimates: Late Season Large Loss* ($ Billions)
Average of the midpoints of the 3 risk modeler estimates is $18.8 billion
RMS
$20 - $25B
AIR
$16 - $22B
Eqecat
$0 $5 $10
$10 - $20B
$15
$20
$25
*US insured property and business interruption losses only. Sandys landfall in the northeast US occurred Oct. 29, 2012. Sources: RMS (11/14/12 est.), AIR (11/26/12 est.), Eqecat (11/1/12 est.); Compiled by the Insurance Information Institute.
Top 12 Most Costly Hurricanes in U.S. History

(Insured Losses, 2012 Dollars, $ Billions)
10 of the 12 most costly hurricanes in insurance history occurred over the past 8 years (20042012)
$60 $50 $40 $30 $20 $10 $0
Irene (2011) Jeanne (2004) Frances (2004) Rita (2005) Hugo (1989) Ivan (2004) Charley (2004) Wilma (2005) Ike (2008) Sandy* (2012) Andrew (1992) Katrina (2005)
Hurricane Irene became the 12th most expense hurricane in US history in 2011
$7.8 $8.7
Hurricane Sandy could become the 3rd costliest hurricane in US insurance history
$25.6 $18.8 $13.4
$48.7
$4.4
$5.6
$5.6
$6.7
$9.2
$11.1
*Estimate as of 12/09/12 based on average of current range estimate midpoints from AIR, Eqecat and RMS; Excludes NFIP. Sources: PCS; Insurance Information Institute inflation adjustments to 2012 dollars using the CPI.
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Top 16 Most Costly World Insurance Losses, 1970-2012*

$60 $50 $40 $30 $20 $10 $0

Hugo (1989)
Hurricane Sandy could become the 6th costliest event in global (private) insurance history
$11.1 $13.4 $13.4 $9.6 $9.2 $8.7 $8.5 $8.1 $7.8
5 of the top 14 most expensive catastrophes in world history have occurred within the past 3 years
$48.7 $38.6 $23.9 $24.6 $25.6 $18.8 $13.4
Winter Storm Daria (1991)
Chile Quake (2010)
Ivan Charley Typhoon Wilma Thailand New Ike Sandy Northridge WTC (2004) (2004) Mirielle (2005) Floods Zealand (2008) (2012)** (1994) Terror (1991) (2011) Quake Attack (2011) (2001)
Andrew Japan Katrina (1992) Quake, (2005) Tsunami (2011)**
*Figures do not include federally insured flood losses. **Average of range estimates of $35B - $40B as of 1/4/12 adjusted to 2012 dollars; Privately insured losses only. ***Estimate as of 12/09/12, based on average of midpoints from range estimates from AIR, RMS and Eqecat. Sources: Swiss Re sigma 1/2011; Munich Re; Insurance Information Institute research.
64
Top 16 Most Costly Disasters in U.S. History

$60 $50 $40 $30 $20 $10 $0

Includes Tuscaloosa, AL, tornado
Hurricane Sandy could become the 5th costliest event in US insurance history
Includes Joplin, MO, tornado
$48.7
$23.9 $24.6 $25.6 $18.8 $13.4
$9.2 $11.1 $8.7 $7.8 $7.5 $7.1 $6.7 $4.4 $5.6 $5.6
Irene (2011) Jeanne (2004) Frances (2004) Rita Tornadoes/ Tornadoes/ Hugo (2005) T-Storms T-Storms (1989) (2011) (2011) Ivan (2004) Charley (2004) Wilma (2005)
Ike (2008)
Sandy* Northridge9/11 Attack Andrew (2012) (1994) (2001) (1992)
Katrina (2005)
Hurricane Irene became the 12th most expense hurricane in US history in 2011
NY Gov. Andrew Cuomo has requested $42 billion in federal aid. NJ Gov. Chris Christie has requested $29.4B.
65
*Estimate as of 12/09/12 based on average of range midpoints from AIR, RMS and Eqecat.. Sources: PCS; Insurance Information Institute inflation adjustments.
US Insured Catastrophe Losses

($ Billions, 2012 Dollars)
$80 $70 $60
$73.4 $37.8
2012 CAT losses were down nearly 50% from 2011 until Sandy struck in late October
$34.7
$33.7
$16.3
$14.0
$12.6
$14.3
$11.6
$11.0
$8.0
$8.8
$7.6
$4.8
$10 $0
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12*
US CAT Losses in 2012 Could Become the 2nd or 3rd Highest in US History on An Inflation-Adjusted Basis (Pvt Insured). 2011 Losses Were the 5th Highest
$3.8
$6.1
$7.5
$20
$10.5
Record Tornado Losses Caused 2011 CAT Losses to Surge
*As of 1/2/13. Includes $18.8B gross loss estimate for Hurricane Sandy. Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01 ($25.9B 2011 dollars). Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B ($15.6B in 2011 dollars.) Sources: Property Claims Service/ISO; Insurance Information Institute.
$11.5
$14.4
$30
$26.4
$40
$29.2
$33.1
$35.0
66 66
$50
Hurricane Sandy: Number of Claims by Type*

Hurricane Sandy resulted in an estimated 1.38 million privately insured claims resulting in an estimated $10 to $25 billion in insured losses. Hurricane Katrina produced 1.74 million claims and $47.6B in losses (in 2011 $)
Commercial , 167,500 , 12% Auto, 230,500 , 17%
Homeowner , 982,000 , 71%

*PCS claim count estimate as of 11/26/12. Loss estimate represents high and low end estimates by risk modelers RMS, Eqecat and AIR. PCS estimate of insured losses as of 11/26/12 $11 billion. All figures exclude losses paid by the NFIP. Source: PCS; AIR, Eqecat, AIR Worldwide; Insurance Information Institute.
67
Hurricane Sandy: Number of Homeowners Claims by State*

Hurricane Sandy Estimated 982,000 homeowners claims** $6.6 billion in insured losses. Average loss per claim is $6,718 About 1/3 of claims in NY, 1/3 in NJ and 1/3 in all other states
All Other, 292,000 , 30%
New Jersey, 360,000 , 36%
New York, 330,000 , 34%
*Preliminary as of 11/26/12. Source: PCS.
68
Hurricane Sandy: Value of Homeowners Claims Paid, by State* ($ Millions)

Hurricane Sandy
All Other, $1,797 , 27%
Estimated 982,000 homeowners claims** $6.6 billion in insured losses. Average loss per claim is $6,718 Claims in NJ estimated at $2.5 billion (38%) and $2.3 billion in NY (35%)
New Jersey, $2,500 , 38%

New York, $2,300 , 35%

69
Hurricane Sandy: Number of Auto Claims by State*

Hurricane Sandy
All Other, 40,500 , 18%
Estimated 230,500 vehicle claims $779 million in insured losses. Average loss per claim is $3,380
Nearly 60% of the claims occurred in NY state.
New Jersey, 60,000 , 26%
New York, 130,000 , 56%

70
Hurricane Sandy: Value of Auto Claims Paid, by State* ($ Millions)

Hurricane Sandy
All Other, $129 , 17%
Estimated 230,500 vehicle claims $779 million in insured losses. Average loss per claim is $3,380 About 50% of the claim dollars will be paid in NY, 32% in NJ.
New Jersey, $250 , 32%
New York, $400 , 51%
71
Flood Loss Paid by the National Flood Insurance Program, 1980-2012E

Billions (Original Values)
$20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0
1980 1985 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012*
$17.74
Hurricanes Katrina and Rita accounted for the majority of 2005s record $17.4B payout
Hurricane Sandy and other events could result in $7.5 billion in payouts from the NFIP in 2012, second only to 2005 and potentially exhausting the NFIPs borrowing authority
Hurricane Ike
$3.47 $0.23 $0.37 $0.17 $1.30 $0.25 $1.85 $0.64 $0.61 $0.78 $0.77
$7.50
*Estimate as of 11/25/12. Sources: Department of Homeland Security, Federal Emergency Management Agency, NFIP; Insurance Information Institute.
72
Residential NFIP Flood Take-Up Rates in NJ (2010) & Sandy Storm Surge
Flood coverage penetration rates were extremely low in many very vulnerable areas in NJ, with take-up rates far below 50% in many areas
Source: Wharton Center for Risk Management and Decision Processes, Issue Brief, Nov. 2012; Insurance Information Institute.
73
Residential NFIP Flood Take-Up Rates in NY, CT (2010) & Sandy Storm Surge
Flood coverage penetration rates were extremely low in many very vulnerable areas of NY and CT, with take-up rates far below 50% in many areas
Source: Wharton Center for Risk Management and Decision Processes, Issue Brief, Nov. 2012; Insurance Information Institute.
74
Federal Aid Requests for States With Greatest Sandy Impact & Federal Aid Proposals (as of 1/2/13)
Billions
$70 $60 $50 $40 $30 $20 $10 $0
$33B to repair subways, hospitals and other facilities; $9B to upgrade infrastructure against future storms
$39.5B to repair schools roads, bridges, businesses, homes and other facilities; $7.4B to for mitigation and prevention against future storms
$60.4
$60.2
$60.0*
$9.0
House vote scheduled for Jan. 5
$42.0
$9.0
$36.9
$7.9 $29.5
$3.2B to bury power lines, upgrade transmission systems, build sewage treatment $6.0 plants and other mitigation projects
$7.4
$33.0
$3.2
Connecticut
$51.0
House vote scheduled for Jan. 15
Obama Senate House Administration Proposal Proposal Repair Mitigation/Prevention Proposal (Dec. 28) (Jan. 2) States Requested Enormous Sums in Sandy Aid in the Middle of the Fiscal Cliff Debate, Causing Delays
*As of Jan. 2, 2013. Source: New York Times, Dec. 6, 2012; Insurance Information Institute research.
75
New York
New Jersey
Beyond Hurricane Sandy

Before Sandy Struck, Privately Insured Catastrophe Losses Were Down 51% from 2011 Levels
76
Number of Tornadoes and Related Deaths, 1990 2012*

2,000 1,800 1,600
1,297
Number of Tornadoes Number of Deaths

1,424
Tornadoes claimed 553 lives in 2011, the most since 1925

1,692
1,819
600 553 500
1,345
1,376
Number of Tornadoes
1,234
1,173
1,173
1,148
1,146
1,133
1,132
1,400 1,200 1,000 800 600 400 200 0
1,216
1,264
1,282
Number of Deaths
1,103
1,082
1,071
1,098
1,691
941
1,064
400
300
1,064 tornadoes have been recorded so far this year, 68 deaths*
200
100
0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12*
2012 Tornado Losses Got Off to an Ominous Beginning, but Slowed. Insured Losses from Tornadoes and Thunderstorms in 2012 Totaled $14.9B.
*Through Dec. 19, 2012. Source: U.S. Department of Commerce, Storm Prediction Center, National Weather Service at http://www.spc.noaa.gov/climo/online/monthly/newm.html
77
U.S. Tornado Count, Departure from InflationAdjusted Running Total, 2011 vs. 2012*
2011 count was far above average
2012 count was below average, but damages were still high
*Through Nov. 30, 2012. Source: http://www.spc.noaa.gov/wcm/
78
Location of Tornadoes in the US, 2012*
1,066 tornadoes killed 68 people through Dec. 19
*Through Dec. 19 2012. Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2012_annual_summary.html#
79
Location of Tornadoes in the US, 2011
1,894 tornadoes killed 553 people in 2011, including at least 340 on April 26 mostly in the Tuscaloosa area, and 130 in Joplin on May 22
Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html#
80
Location of Large Hail Reports in the US, 2012*
There were 7,022 Large Hail reports through Dec. 19, 2012, causing extensive damage to homes, businesses and vehicles
*Through Dec. 19, 2012. Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2012_annual_summary.html#
81
Location of Large Hail Reports in the US, 2011
There were 9,417 Large Hail reports in 2011, causing extensive damage to homes, businesses and vehicles
82
Location of Wind Damage Reports in the US, 2012*

Extreme density due to late June derecho
Hurricane Sandy resulted in a large volume of wind damage reports There were 14,043 Wind Damage reports through Dec. 19, causing extensive damage to homes and, businesses
83
Location of Wind Damage Reports in the US, 2011
There were 18,685 Wind Damage reports through Dec. 27, causing extensive damage to homes and, businesses
84
Severe Weather Reports, 2012*
There were 22,131 severe weather reports through Dec. 19; including 1,066 tornadoes; 7,022 Large Hail reports and 14,043 high wind events
85
Severe Weather Reports, 2011
There were 29,996 severe weather reports in 2011; including 1,894 tornadoes; 9,417 Large Hail reports and 18,685 high wind events
86
Number of Severe Weather Reports in US, by Type, 2012

Tornadoes, 1,066 , 5%
Large Hail, 7,022 , 32%

Tornadoes accounted for just 5% of all Severe Weather Reports in 2012 compared to 6% in 2011, though they caused less damage and far fewer deaths
87
Wind Damage, 14,043 , 63%

Insurance Information Institute Online:
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NatCatSERVICE Downloadcenter for statistics and analyses on natural disasters

The downloadcenter provides free access:
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
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800
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Annual statistics Long-term statistics Information on significant natural disasters
400
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500% 450% 400% 350% 300% 250% 200% 150% 100% 50% 0% 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Focus analyses
NatCatSERVICE methodology, info brochure Publication Topics Geo www.munichre.com/natcatservice/downloadcenter/en
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Natural Catastrophes in North America Perils, Risks and Insurance

Contents Perils Risks Climate change and climate variability Risk map of North America Insurance
Insurance aspects in the United States and Canada

Agricultural insurance Weather derivatives Message to the Market
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Copyright 2013 Munich Reinsurance America, Inc. All rights reserved. "Munich Re" and the Munich Re logo are internationally protected registered trademarks. The material in this presentation is provided for your information only, and is not permitted to be further distributed without the express written permission of Munich Reinsurance America, Inc. or Munich Re. This material is not intended to be legal, underwriting, financial, or any other type of professional advice. Examples given are for illustrative purposes only. Each reader should consult an attorney and other appropriate advisors to determine the applicability of any particular contract language to the reader's specific circumstances.

2012 Natural Catastrophe Year in Review: January 3, 2013

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2012 Natural Catastrophe Year in Review: January 3, 2013

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2012 NATURAL CATASTROPHE YEAR IN REVIEW

Welcome/Introduction Terese Rosenthal

Questions and Answers

US NATURAL CATASTROPHE UPDATE

US Natural Catastrophe Update

US Natural Catastrophe Update

Natural Disaster Losses in the United States

Estimated Overall Losses (US $m) 52,240

Estimated Insured Losses (US $m) 26,360

Tropical Cyclone Severe Thunderstorm Drought Wildfire Winter Storm

Source: MR NatCatSERVICE - Includes Federal Crop Insurance Losses.

US Natural Catastrophe Update

Natural Catastrophes in the USA 1980 2012

2012 Total: 184 events

US Natural Catastrophe Update

Natural catastrophes in the USA 1980 2012

Overall losses (in 2012 values)

Insured losses (in 2012 values)

US Natural Catastrophe Update

Significant Natural Catastrophes, June Sept 2012

Date June Sept 2012 March 2 - 3 April 2 4

Event Central US Drought Thunderstorms Thunderstorms

Estimated Economic Losses (US $m) 20,000 5,000 1,550

Estimated Insured Losses (US $m) 16,000 2,500 775

Source: MR NatCatSERVICE - Includes Federal Crop Insurance Losses.

US Natural Catastrophe Update

Significant Natural Catastrophes, 1950 2012

Eleven significant natural catastrophes occurred in the United States in 2011.

US TROPICAL CYCLONES 2012

US Natural Catastrophe Update

Tropical Cyclones Impacting the United States in 2012

Beryl Debby Sandy

US Natural Catastrophe Update

US Natural Catastrophe Update

Economic Losses in U.S. of $50 billion, insured losses of $25 billion

US Natural Catastrophe Update

Impacts of Hurricane Sandy

Add few more bullet points

US Natural Catastrophe Update

Other US Tropical Cyclones in 2012

US Natural Catastrophe Update

Number of US Landfalling Tropical Cyclones 1900 - 2012

US Natural Catastrophe Update

Insured US Tropical Cyclone Losses, 1980 - 2012

Sources: Property Claims Service, MR NatCatSERVICE, NFIP

2012 US THUNDERSTORM SEASON

US Natural Catastrophe Update

2012 US Tornado Count

US Natural Catastrophe Update

Notable Thunderstorm Events

Source: Property Claims Service MR NatCatSERVICE

US Natural Catastrophe Update

US Thunderstorm Loss Trends

Average thunderstorm losses have increased sevenfold since 1980.

First Half 2011 2011 Total: $16.4 $16.4 bn bn

Source: Property Claims Service MR NatCatSERVICE

OTHER US NATURAL CATASTROPHES IN 2012

US Natural Catastrophe Update

Current US Drought Conditions

US Natural Catastrophe Update

2012 US Drought Impacts

US Natural Catastrophe Update

Number of Acres Burned in Wildfires, 1980 2012